Ep. 52 - 3 Biggest Beneficiary Distribution Mistakes

Описание: In today's edition, the gang discusses the biggest mistakes participants make with their beneficiary designation form. Qualified retirement plan beneficiary designation forms are vital documents that need to be carefully maintained and monitored by the plan sponsor. These beneficiary forms take precedence over any other document, such as a will, that the participant has signed. And, the participants need to remember that they are in perpetuity. They are active until a participant completes a new form.

But first, Kristina Kananen with a Breaking Rumour:

SECURE Act 2.0 has been introduced to the House Ways and Means Committee. Its goal is to increase participation in 401(k), 403(b) and SIMPLE plans by
• Mandating auto-enrollment;
• Making Long-Term Part-Time employees eligible to enter the plan in 2 years and not 3;
• Permitting employers to provide de minimis financial incentives for employees to contribute to a 401(k) or 403(b) plan;
• Raising the RMD age to 75;
• Increasing the catch up contributions to $10,000 per year from $6,500;
• Making matching contributions to the 401(k) plan for student loan repayments;
• Allowing 403(b) plans to participate in a Multiple Employer Plan;
• Eliminating the Tier Structure and increasing the maximum credit from $1,000 to $1,500, increases the maximum income eligibility and index the creditable contribution amount for inflation for the Retirement Savings Contribution Credit.

In our humble opinion:
#3 - Not knowing where the beneficiary designation form is. It's important for both the plan sponsor and the participant to know where the forms are and that they are up to date.
#2 - Not all the children are listed on the form. If the participant has Cathy and Dave when the form is completed, and name those 2, but then they add Beth to the mix (but don't list her), Beth will be excluded. It's generally better to use language that is more inclusive. "All children" as an example.
#1 - Having the wrong spouse on the beneficiary form! While it may not sound very romantic, it's probably a best practice that the participant list "spouse" as their primary beneficiary. Then, if there's another spouse when the participant dies, the current spouse will be the beneficiary, not the one that was married when the form was signed. If a specific spouse is named, the participant must understand that the beneficiary designation form is in perpetuity and will outlast the marriage.

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